South Australia’s new commercial property leasing regulations
April 23, 2020
The SA Parliament has passed regulations to define those instances under the COVID-19 Emergency Response Act 2020 (the COVID Act) which apply if tenants are suffering ‘financial hardship’ as a result of the pandemic.
What is ‘financial hardship’?
‘Financial hardship’ is now defined under the COVID-19 Emergency Response (Commercial Leases) Regulations 2020 (the COVID Regulations) by reference to a commercial tenant’s eligibility for the Australian Government’s JobKeeper program.
Tenants are eligible for the subsidy if their business:
- Has an aggregated turnover of less than $1 billion and they estimate their turnover has or will likely fall by 30% or more, or
- Has an annual turnover of $1 billion or more and they estimate their turnover has fallen or will likely fall by 50% or more, and
- Is not subject to the Major Bank Levy.[i]
The COVID Act applies to commercial leases (including retail leases) if tenants satisfy the above criteria.
The COVID Act
The SA Parliament passed the COVID Act on 8 April 2020 to make various temporary modifications to SA law in response to the COVID-19 pandemic.
The COVID Act introduces temporary (six month) measures to protect tenants in commercial leases who are suffering financial hardship as a result of the pandemic. A landlord is prohibited from taking a prescribed action (including terminating the lease, accessing a tenant’s security or requiring payment of interest on unpaid rent) against a tenant on grounds of a breach of a lease during this period consisting of:
- A failure to pay rent
- A failure to pay outgoings
- The business operating under the lease not being open for business during the hours specified in the lease, or
- Any other act or omission of a kind prescribed by the COVID Regulations.
The COVID Act also prohibits:
- Rent increases in commercial leases (unless rent is based on turnover or otherwise agreed to by a landlord and tenant), and
- A tenant paying any statutory land tax costs or reimbursing a landlord for the payment of land tax under a commercial lease.
What if a landlord disputes a tenant’s claim of financial hardship?
If landlords and tenants cannot agree on a determination of whether or not a tenant is suffering financial hardship as a result of the pandemic, the COVID Act reserves express powers for the Small Business Commissioner to mediate the dispute or, if necessary, make a binding determination.
Where to now?
These emergency measures demonstrate key initiatives by the SA Government to contain the economic effects of the pandemic in its jurisdiction. We are closely monitoring the state’s progress with implementing the National Code of Conduct – Commercial Tenancies into state-based law.
Further information / assistance regarding the issues raised in this article is available from the authors, Fiona Nelson – Partner and Wesley Hodgson – Lawyer or your usual contact at Moray & Agnew.
The above content is commentary rather than legal advice and was prepared on the basis of applicable legislation, government programs and initiatives that were in place as of the date of publication. Given the ongoing evolution of both the COVID-19 pandemic and frequent consequential changes to the various laws and programs within all Australian states and territories, readers should seek legal advice on the current situation as applicable to their specific circumstances before taking any action in relation to the above.
[i] The Major Bank Levy applies to banks with over $100 billion in total liabilities. It currently applies to the five largest banks: Commonwealth Bank, ANZ Bank, Westpac, National Australia Bank and Macquarie Bank.
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